COURSE SYLLABUS TA 321 PRINCIPLES OF INTERNATIONAL TAXATION Michael Vinson Director, International Tax Certificate Program and The Anne and Jeff Howson Adjunct Professor of Taxation Golden Gate University SPRING, 2005 SEMESTER This course presents a broad survey of the rules of U.S. income taxation regarding international transactions. It will cover both in-bound transactions - the treatment of non-resident aliens and foreign corporations investing and/or doing business in the United States, as well as out-bound transactions the treatment of U.S. citizens and residents investing and/or doing business outside the U.S. Class will meet on Wednesdays, from January 11, 2006 through March 15, 2006 from 5PM to 9PM in Building 536M, Room 5212. Description of the Course The first section of the course will deal with the fundamental principles of international taxation which apply to both in-bound and out-bound transactions including: 1) determining who is a U.S. taxpayer; 2) source of income and expense rules; and 3) tax treaties. Next we will examine in-bound transactions, including: 1) the treatment of non-resident aliens and foreign corporations investing and/or doing business in the United States; 2) the U.S. withholding tax rules; and 3) the FIRPTA rules for real estate transactions. Finally, we will turn to out-bound transactions, including: 1) controlled foreign corporations and the deferral of income principle; 2) Subchapter F and the exceptions to the deferral of income principle; 3) the foreign tax credit; and 4) the intercompany pricing rules. International taxation is a complex field. The goal of this class is to give you the foundation for identifying issues and planning opportunities for your clients, and to serve as a foundation for advanced study. 1
Course Texts Required: Taxation of International Transactions (2 nd Edition), by Charles H. Gustafson, Robert J. Peroni, and Richard Crawford Pugh ( Gustafson ). Recommended: International Taxation in a Nutshell, by Richard Doernberg ( Doernberg ). The readings in the Doernberg book are recommended and are intended to help you bring the various elements of the course together. Be sure to get the latest edition of this text. International Income Taxation Code and Regulations. As in your professional practice, it is your responsibility to ensure that you are using the most up to date version of the Code and Regulations. You may use any version of the Code and regulations you wish, as long as it is up to date. International Income Taxation Code and Regulations is a convenient version that contains in one volume the principle Code and regulations applicable to international transactions. Be aware, however, that there has been a flurry of recent regulatory activity in the international tax arena and this book may not be up to date. You are required to bring the Internal Revenue Code to class each week. Grading and Course Requirements Grading will be based on in class participation (25%) and an in class, open book final exam (75%). The final exam will be part multiple choice, part essay and will emphasize the ability to identify and resolve tax issues presented by a complex set of facts. Attendance will be taken in class each week. This course will be administered in accordance with Golden Gate University policies and procedures. The University's Standards on Academic Integrity will apply throughout the course. See the Golden Gate University Bulletin for complete details. Any students found guilty of cheating or plagiarism will be punished to the fullest extent possible under University guidelines. 2
Instructor Information Michael Vinson received his J.D. from Hastings College of the Law in 1977 and his LL.M. in Taxation from New York University in 1986. He has worked in the international tax arena since graduating from NYU. His experience includes private law firm practice and public accounting, but most of his experience has been in industry, managing the international tax issues of major corporations including: Tax Counsel, Apple Computer, Inc., Director of Tax, Altera Corporation, and most recently, Vice President of Tax, Hyperion Solutions Corporation. He is currently Of Counsel with GCA Law Partners LLP. He has taught at Golden Gate University since 1988 and is currently the Director of the Golden Gate University International Tax Certificate Program and the Anne and Jeff Howson Adjunct Professor of Taxation. He can be reached as follows: Michael Vinson GCA Law Partners LLP 1891 Landings Drive Mountain View, CA 94043 Direct Dial: 650.237.7228 Telephone: 650.428.3900 Facsimile: 650.428.3901 Email: mvinson@ggu.edu He will be available during breaks and after class for questions and discussions. In addition, students are welcome to call or email him. Appointments will be available where appropriate. Weekly Assignments Students are expected to have completed the reading assignment assigned for each week prior to coming to class. Students are responsible for reading the Treasury regulations applicable to the Code sections assigned, even though the regulations are not specifically mentioned in the assignments. We will be following the Gustafson book in order, covering Chapters one through eight, inclusive. Specific weekly assignments will be provided at the end of each class. The course will generally follow this schedule: 3
A. Week 1- Classification of Individuals & Entities a. Definition of U.S. Taxpayer i. Reading: Gustafson 1170; 1185; 1215-1235 ii. Code: 7701(a)(4),(5),(30),(31); 7701(b) iii. Problems: Gustafson 1190, Problems 2 5 2. Classification of Entities i. Reading: Gustafson 13,020 13,035 ii. Code: 7701(a)(2), (3) iii. Regulations: Treas. Reg. 301.7701-1, -2, and -3 3. Expatriation i. Reading: Notice 97-19, 1997-1 C.B. 394, Section VIII ii. Code: 877; 6039G; 7701(n) iii. Problems: Gustafson 1210 4. Residency Certification i. Reading: Form 8802 5. Recommended: Doernberg, Chapters 1, 2 & 5 B. Week 2 Source of Income and Expense Rules 1. Code: 861, 862, 863, 865, 884(f); Skim Treas. Reg. 1.861-8 2. Problems: Gustafson 2215, 2235 3. Recommended: Doernberg, Chapter 3 C. Week 3 - Foreign Persons U.S. Trade or Business Income 1. What is a U.S. Trade or Business? i. Gustafson 3,000 3095 (Note: Cases and rulings are critical here) ii. Code: 882, 864(b) iii. Problems: Gustafson 3155 iv. Recommended: Doernberg 4.01, 4.02 2. What is Effectively Connected Income ( ECI ) i. Gustafson 3,100 3,150 ii. Code: 882, 864, 875, 863(e), 882, 883, 887, 897, 921(d), 926(b), 953(c)(3)(C)); Skim Regs. 1.864-4(c)(5); 1.864-6(b)(2)(ii)(b) iii. Recommended: Doernberg 4.03 3. Branch Profits Tax i. Gustafson 3,000 3095 ii. Code: 884 iii. Problems: Gustafson 3235 iv. Recommended: Doernberg 4.05 4. Effect of Tax Treaty Provisions i. Gustafson 3,160 3,220 (Skip 3,187, 3,188, 3,205) ii. U.S. Model Treaty Articles 5, 7 & 9 iii. Problems: Gustafson 3,225 iv. Recommended: Doernberg, Chapter 5 4
D. Week 4 - Foreign Persons Non-Business Income 1. Interest Income i. Code: 861(a)(1),(c); 862(a)(1); 871(a)(1),(g)-(i); 881(a),(c),(d) ii. U.S. Model Treaty Article 11 2. Dividends i. Code: 861(a)(2); 862(a)(2); 871(i)(2)(D), 881(d) ii. U.S. Model Treaty Article 10 3. Gains on Sales of Property i. Code: 865(a), (g)(1), 871(a)(2) 4. Income from Intellectual Property i. Code: 865(a), (g)(1), 871(a)(2) ii. U.S. Model Treaty Article 12 5. Tax Treaties Limitations on Benefits i. U.S. Model Treaty Article 22 6. Withholding i. Code: 1441; 1442; 1461-1464 7. Real Property Income of Foreign Persons i. Code: 861(a)(4), (5); 862(a)(4), (5); 871(d); 882(d), 897, 1445, 6039C ii. U.S. Model Treaty: Articles 6, 13 8. Gustafson 4000 4075 (skip 4070); 4100; 4110 4180 (skip 4151); 4185-4260 9. Recommended: Doernberg 4,04, 4.06, 6.04, 6.05 10. Problems i. Gustafson 4280 Problems 1 5; 4105 Problems 1 7, 4280 Problems 12 16 E. Week 5 Foreign Tax Credit 1. Direct Foreign Tax Credit i. Code: 901, 903 ii. U.S. Model Treaty: Article 23 iii. Gustafson 5000-5133 iv. Recommended: Doernberg 8.01 8.04 v. Problems: Gustafson 5130, Problems 1 15 2. Indirect Foreign Tax Credit i. Code: 902, Skim 243(a); 245(a) ii. Gustafson 5135 5175 iii. Recommended: Doernberg Chapter 8.05 iv. Problems: Gustafson 5140, Problem 1; 5180, Problems 1 5 3. Foreign Earned Income Exclusion i. Code: 911 ii. Gustafson 5285 5330 iii. Recommended: Doernberg Chapter 7.02 iv. Problems: Gustafson 5335, Problem 1 4 5
F. Week 6 & 7 - Controlled Foreign Corporations ( CFCs ) and Anti-Deferral Regimes 1. Code: 951-964, 1248, Skip 953; 954(g)-(i); 955; 962 2. Gustafson 6000 6030; 6065; 6085; 6115 6120; 6170 6175 3. Recommended: Doernberg 10.01 10.05 4. Problems: Gustafson 6035 Problems 1 10, 6070 Problems 1 2, 6165 Problem 1, 6205 Problem 1, 6220 Problem 1 G. Week 8 - Foreign Tax Credit Limitations 1. Code: 904 (substantially revised in 2004, make sure you understand the effective dates of the various sections) 2. Gustafson 7000 7040; 7047-7060; 7070-7125; 7145-7150 3. Recommended: Doernberg 8.06 4. Problems: Gustafson 7155 Problems 1 7, 10, 7065 Problems 1 6 H. Week 9 - Transfer Pricing 1. Code: 482 2. Gustafson 8000 8055, 8080-8090, 8115, 8140-8155 3. Recommended Doernberg Chapter 9 4. Problems: Gustafson 8125 Problems 1 7 I. Week 10 Summation and Final Exam 6